The World is Turning Japanese [Chart]
Negative rates, Kuroda’s “Peter Pan” analogy, and gold’s surge
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Nearly a year ago, Bank of Japan governor Haruhiko Kuroda described the unlikely inspiration behind Japan’s unprecedented monetary stimulus: Peter Pan.
I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’. Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions.
Kuroda’s optimism is desperately needed in a country that has now been officially “leapfrogged” by the four Asian Tigers in terms of Real GDP per capita (PPP). With over a decade of experimentation in extreme monetary policy under their belts, Japan has very little to show for it.
It would be fine if this story of economic malaise could be confined as a global outlier. However, recent circumstances have prodded the world’s central bankers to finally buy into the tale of Peter Pan.
The world is turning Japanese.
So Much Negativity
Negative interest rates were an economic pipe dream many decades ago, but the idea of “charging” interest to hold money is now becoming mainstream. Conventional wisdom was that depositors would just hoard cash rather than depositing at a cost, but now the people running central banks are beginning to believe that this fear is misplaced. Especially as society becomes more cashless, the inconvenience of withdrawing money to save a few bucks isn’t worth it.
Central banks in Switzerland, Sweden, Denmark, and Japan now all have negative interest rates. The ECB has also held their Deposit Facility Rate for overnight deposits in the negative since June 2014.
In recent weeks, the interest in this economic experiment has risen significantly. Sweden cut their rates deeper into negative territory, signalling to the rest of the world that there is nothing to fear. Meanwhile, both the Federal Reserve and the Bank of Canada have openly pondered the possibility of NIRP in their respective jurisdictions.
Not everyone agrees with the central bankers in seeing the Peter Pan analogy to be a fitting representation.
We’d liken it more to a squad of musketeers running out of gunpowder, and turning desperately to their bayonets to win a decision. It doesn’t matter how much conviction and optimism the crew has in their bayonet skills – at the end of the day, it’s only going to add a few extra minutes of life into the inevitable battle against a much more powerful deflationary force.
In other words, “hope” isn’t a strategy that central bankers can use to any efficacy, and wishful thinking can only go so far. The market seems to agree, and it’s part of the reason that stocks have sold off this year. Even the “safe haven” gold trade is back, after being absent for much of the previous year.
Many critique assets such as gold, which is up 15% year-to-date, because it does not pay a dividend or interest.
This may be true, but at least gold does not “charge” interest, as bankers across the world are beginning to ponder.
Visualizing the New Era of Gold Mining
This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.
Visualizing the New Era of Gold Mining
Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010.
The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply.
This infographic sponsored by NOVAGOLD highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.
The Current State of Gold Production
Between 2010 and 2019, gold production increased steadily, though this growth has stagnated over the past few years.
|Year||Gold Production, tonnes||YoY % Change|
Along with a small decrease in gold production in 2020, there were no new major gold discoveries in 2021.
The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future.
Sustaining Supply: Gold for the Future
Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.
From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies.
Today, 10 of the top 15 mining jurisdictions for investment are located in North America, according to the Fraser Institute report published in 2023.
A Golden Opportunity
Located in Alaska, one of the world’s safest mining jurisdictions, NOVAGOLD’s 50% owned Donlin Gold project has the highest average grade of gold among major development projects in the Americas. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.04g/t.
Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves.
NOVAGOLD is focused on the Donlin Gold project in equal partnership with Barrick Gold.
Learn more about Donlin Gold .
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